GXO Logistics, Inc.

Welcome to GXO's fourth quarter and fiscal year 2021 earnings conference call and webcast. My name is Paul and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements the use of non-GAAP financial measures, and company guidance. During this call, the company will be making certain forward-looking statements within the meaning of applicable securities law, which by their nature involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those projected in its forward-looking statements. A discussion of factors that could cause actual results to differ materially is contained in the company's SEC filings. The forward-looking statements in the company's earnings release or made on this call are made only as of today and the company has no obligation to update any of these forward-looking statements except to the extent required by law. The company may also refer to certain non-GAAP financial measures as defined under the applicable SEC rules during this call. Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earnings release and the related financial tables are on its website. unless otherwise stated, all results are reported on this call are reported in United States dollars. The company will also remind you that this guidance incorporates business trends to date and what it believes today to be appropriate assumptions. The company's results are inherently unpredictable and may be materially affected by many factors, including fluctuations in global exchange rates, changes in global economic conditions and consumer demand spending, labor market and global supply chain constraints, inflationary pressures, and the various factors detailed in its filings with the SEC. This guidance also reflects the company's estimates to date regarding the impact of the COVID-19 pandemic on its operation. It is not possible for the company to actually predict demand for services, and therefore its actual results could differ materially from the guidance. You can find a copy of the company's earnings release, which contains additional important information regarding forward-looking statements and non-GAAP financial measures in the investors section of the company website. I will now turn the call over to GXO's Chief Executive Officer, Malcolm Wilson. Mr. Wilson, you may begin.

Thank you, Paul. Good morning, and welcome to GXO's fourth quarter and full year 2021 earnings call. With me here today are Barish Oran, our Chief Financial Officer, and Mark Manduka, our Chief Investment Officer. In the fourth quarter, our operations again delivered the highest quarterly revenue and adjusted EBITDA in our history. We delivered double-digit organic revenue growth in every quarter of 2021. We finished the year with an accelerating trajectory growing at 19%. Moreover, we see great momentum as we have progressed into 2022. As a result, we are raising our 2022 guidance. We delivered a successful peak for our customers during the fourth quarter, and we played our role in delivering holiday cheer for millions of consumers. We managed the labor market exceptionally well, including recruiting over 20,000 new team members. And we navigated an elongated peak period that ran from mid-November to late December. We helped our customers manage the ongoing e-commerce channel shift with online spend up double digits. It's worth highlighting that through the Thanksgiving weekend, our overall e-commerce activity levels were up 100% from the start of the quarter, and some of our sites handled over half a million outbound e-commerce units per day. GXO continues to capitalize on the strong secular tailwinds of e-commerce, automation, and outsourcing. In 2021, we won contracts with an aggregate lifetime value of approximately $5 billion. This gives us a strong foundation to achieve our 2022 organic revenue growth target of 8% to 12%. And this growth is on an already record 2021 year. Recent and notable customer wins and expansions include Abercrombie & Fitch, ASOS, BT, Carrefour, Curry's, Kingfisher, Raytheon, Saks, and Zalando. It's worth noting that two of our recent large UK technology wins, BT and and Curry's are first-time outsourcing partnerships. These wins are a direct benefit of the new technology verticals that we gained through our 2021 acquisition in the UK. Our sales pipeline at the end of the fourth quarter reached a new record level at $2.5 billion, and half of these opportunities are within the e-commerce sector. Approximately 60% of our revenue comes from customer relationships that span multiple countries, and over the course of the year, we were able to expand our operations with 80% of our top 20 customers. At GXO, we believe that being a leader in logistics means making sure we take care of our partners, people, and the planet. GXO is bringing significant environmental benefits to customers through our pioneering work on ESG solutions that increase order precision, optimize stock levels, reduce packaging, and streamline the consumer returns process. For example, our reverse logistics revenues were up 28% year over year in the fourth quarter, and this is indicative of our vital role in the circular economy, as we help to reduce the carbon footprint from the global supply chain. We're looking forward to updating you on our progress towards achieving our industry-leading ESG targets that underpin our AA MSCI ESG rating when we will publish our inaugural sustainability report in the second quarter. I'm extremely proud of our team's stellar performance in 2021. Our combination of world-class people, global scale, and industry-leading technology is delivering increasing value for customers and shareholders. Given our strong results and continued confidence in our growth, we'll be providing long-term expectations at our Capital Markets Day later this year. I will now hand the call over to Baris. who will take you through GXO's fourth quarter and full-year financial performance. Baris, over to you.

Thank you, Malcolm, and good morning, everyone. 2021 has been a year of records. Record revenue, record EBITDA, and record EPS. In the fourth quarter, we generated revenue of $2.3 billion, net income of $56 million, and adjusted EBITDA of $167 million. Our organic revenue growth was an impressive 19% in the quarter, the highest for any quarter last year against our toughest quarterly comparison. For the full year, we generated revenue of $7.9 billion, net income of $153 million, and pro forma adjusted EBITDA of $633 million. Our return on invested capital has surpassed 30%, a level we expect to exceed looking forward. This full year's revenue represents a year-over increase of 28% and is up 15% on an organic basis. with M&A contributing 10% and FX contributing 3%. Don't underestimate what we are achieving in terms of absolute growth. In dollar terms, that 28% increase is equivalent to the prior year sales of our largest European pure play competitors. In 2021, Revenue from our top 20 customers grew organically by approximately 22%, demonstrating the success of our land and expense strategy. When the largest brands in the world want to directly reach consumers via e-commerce, GXO is their partner of choice. Moving to earnings. Our 39% growth in full-year adjusted pro forma EBITDA reflects our strong revenue growth and our high quality contracts that enable us to pass through labor costs in an inflationary environment. Our business is naturally a high inflation hedge. Our full-year adjusted pro forma EBITDA growth was 73%. Our cash flow from operations for the full year 2021 was $455 million. We spent $250 million in CapEx. Specifically, we dedicated half of our total CapEx to automation, technology, and software. As we continue to lead the industry in tech implementation, digitization, and robotics. We generated free cash flow of $216 million for the full year, which converted about 30% of our adjusted EBITDA. Our fourth quarter free cash flow was $137 million, which reflects our rigorous cash collection processes. Turning to the balance sheet, We are committed to maintaining our investment-grade credit rating. We finished 2021 with net debt of $628 million. Our leverage ratio is one time, which is in line with our previously discussed net long-term leverage range of one to one and a half times. And for additional flexibility, we also have an available $800 million of revolving credit facilities. Our balance sheet strength is very important to our customers and gives us great optionality for future growth initiatives. I'll now turn the call over to Mark.